Venture capital investment: the case for a green proptech portfolio
Venture capital investment in the proptech space is no longer about merely turning a profit. VC funds are increasingly seeking sustainable solutions for the real estate industry, with greentech – technology which seeks to mitigate or reverse damage to the environment caused by humans – the latest niche to emerge.
“I think greentech is moving in a really promising direction,” enthuses Zain Jaffer, serial entrepreneur and manager of the proptech-focused venture capital fund at Blue Field Capital, where he is a partner. “As people become more environmentally aware, companies that offer sustainable solutions are being rewarded across the market. I’m constantly talking with proptech start-ups who are innovating in so many ways.”
Jaffer knows a thing or two about start-up culture after selling his own mobile advertising company to Blackstone in 2019 for $780 million. His own investment firm, Zain Ventures, has significant real estate holdings, and this potent combination has made him an expert in the venture capital and proptech space. For Jaffer, it’s the range of greentech and sustainable proptech outfits which is truly exciting today.
The analysis helps employers fine-tune their spatial needs and manage their energy usage – lighting, AC, and so on – from a distance to minimize any waste – Zain Jaffer
He says that firms to watch in the space include Basking, a Berlin-based company that’s engineered a workplace occupancy analytics platform to help companies reduce their office space and energy. “Basking’s software integrates with a building’s WiFi infrastructure to offer employers and real estate professionals important insights into the use of office space,” Jaffer explains. “The analysis helps employers fine-tune their spatial needs and manage their energy usage – lighting, AC, and so on – from a distance to minimize any waste.”
Another firm Jaffer is excited about is Boxabl, a frontier construction technology company that’s quickly disrupting the housing industry. “The founders, Paolo and Galiano Tiramani, found a way to engineer the world’s only home building system that’s compatible with scalable factory assembly; mass production meets home building,” explains Jaffer. “They use sustainable building material to build accessory dwelling units that are fit for any climate on the planet. The founders started with one mission: to make affordable living easy. They just closed their second round of funding at a $226 million valuation.”
Venture capital investment and ESG
Driving the focus on greentech and sustainable proptech solutions is a wider consideration of environmental, social and governance (ESG) aspects in the corporate sphere. In Europe, the EU’s regulation on sustainability‐related disclosures in the financial services sector has inevitably moved the goalposts for venture capital investment. This directive, known as the SFDR, seeks to ensure that financial market participants, including venture capital funds, take into account sustainability and ESG factors in their decision-making around investments.
It’s this kind of legislation which is encouraging venture capital investment funds to not only look at where they spend, but also how they obtain capital.
PropTech1 Ventures, the proptech-focused European venture capital fund, has recently raised further investment capital into the millions, including funds from an investment vehicle of the noventic group, one of the leading pioneers of the climate-intelligent management of real estate.
Says Nikolas Samios, managing partner of PropTech1: “2021 and subsequent years will be increasingly dominated by business opportunities around new ESG regulation. Accordingly, we could hardly have attracted a better new anchor investor. The collective knowledge and market access of our investors further strengthens both ourselves as a fund and the start-ups in our portfolio.”
But it is Pi Labs, Europe’s first and most active proptech VC, which is one of the most pioneering investors and actors in the space. Says Faisal Butt, CEO, chairman and founder of Pi Labs: “ESG is of upmost importance to us, and to the future of real estate.
“This is an area we are actively researching and actively investing into. In fact, our research this year is breaking down ESG into its component parts, the E, S and G, with a view to invest in transformational technologies that can help navigate the real estate industry to a cleaner and more sustainable future.
“We conduct ESG due diligence on start-ups prior to investing, and then help them build on their ESG offering after we invest. We’re proud that 50% of our portfolio companies already work directly to address ESG issues, but this is just the start for us.”
Last year, Pi Lab’s successfully launched an industry whitepaper, ‘Technology and the Future of Real Estate Investment Management’ – co-written with Professor Andrew Baum from the University of Oxford – to explore solutions and benefits such as sustainability.
“It also highlighted some key tech industry pioneers, many of which in our portfolio, such as Demand Logic, which is helping landlords like Grosvenor and L&G reduce their building energy costs and carbon emissions. 720, an indoor environmental quality platform, is also a great example of a start-up that is helping landlords deliver ‘healthier’ buildings,” Butt adds.
Venture capital investment – the right people
Increasingly, attention to greentech and sustainable proptech is influencing recruitment drives in the venture capital industry as well.
MetaProp, the largest venture capital investor in early stage proptech globally, recently appointed real estate private equity executive Monica O’Neill as a partner to drive the expansion of the firm’s institutional client base. O’Neill’s mandate includes a focus on sustainability and the future.
Says O’Neill: “The potential for proptech to transform real estate investment processes and productivity, as well as ESG technologies, in the fight against global climate change, are truly enormous. Real estate’s pivotal role in economies and yet its dependence on traditional business models means the industry is the next great prize in tech investing.”
Meanwhile, the UK’s fintech, proptech and consumertech VC Love Ventures has been inspired by climate goals to scrutinize its daily business practices. Explains partner Adrian Love: “In the VC world, investors are often accustomed to flying around the globe for meetings. We are one of the new wave of emerging micro VCs that are planning first and second meetings via videocall, more often than not. That also levels the playing field, and means you can have more high velocity meetings with more people, to access more ideas in the first place.”
Top Image – Getty Images: metamorworks